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Tirole’s Nobel Prize in Economics and Its Implications for Regulationhttps://finhistomics.com/2014/10/18/tiroles-nobel-prize-in-economics-and-its-implications-for-regulation/
https://finhistomics.com/2014/10/18/tiroles-nobel-prize-in-economics-and-its-implications-for-regulation/#respondSat, 18 Oct 2014 20:29:49 +0000http://finhistomics.com/?p=288This year’s economics Nobel Prize (technically, it is not a Nobel Prize, but the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) went to the French economist Jean Tirole. The price was awarded for his “analysis of market power and regulation”, according to the Royal Swedish Academy of Sciences.

Tirole has devoted much of his academic career to the question how to regulate markets with oligopolistic or monopolistic characteristics, such as companies in formerly public industries (railroads, post, telecommunications, highways, electricity and utilities). In other words, Tirole addresses markets which the economics profession traditionally does not believe to exist, as economists usually presuppose markets to be perfect, with fierce competition and in which companies are price takers as opposed to price setters. Left unregulated, such markets run danger of producing socially undesirable results: higher prices than justified by firms’ costs or the survival of inefficient companies by blocking entry of more productive ones. Regulating imperfect markets, however, is difficult. In this context, Tirole stresses the importance of asymmetric information – that is, firms are generally more knowledgeable than the government with regard to industry-specific details, such as production costs. The task of regulating these markets is further complicated by the fact that oligopolistic/monopolistic markets are different from case to case. Hence, there exist no standard solutions for regulation. For example, the committee points towards undercutting prices, which is generally prohibited under competition law, as setting prices below one’s production costs is an instrument for eliminating competition. Looking at the newspaper market, however, makes clear that prohibiting price cutting is not warranted in all cases. Newspapers, for example, often give away free copies in order to attract readers and thus increase advertisement income.

Tirole deserves special credit, however, for not being blind to the dangers accompanying industry-specific regulation. In this context, Tirole acknowledges that regulators may be captured by the ones they are supposed to be regulating in the public interest. Stigler (1971) is generally credited for conceptualising the economic theory of regulation (backed by empirical data) which posits that regulation often benefits producers rather than consumers. The reason for this lies in the fact that firms have a high stake in the outcome of regulatory decisions and will therefore devote considerable resources to gain favourable regulation. The public’s interest, on the other hand, is widely dispersed and any individual only has a small stake in the outcome. Thus, regulators may provide regulation in response to demand. Tirole, together with Laffont, complemented Stigler’s economic theory of regulation by providing a supply-side aspect. The authors allow for agency problems which manifest themselves in regulators providing favourable regulation for the regulated entities. According to Laffont & Tirole, decision-makers may be captured by the regulatees through monetary bribes, personal relationships, revolving doors between regulating agencies and the industry as well as party contributions.

Tirole’s seminal contribution to the way we see and try to regulate imperfect markets is deserving of the price in its own right. The Prize, however, is well-earned for at least two additional reasons: First, the trend towards successively less market discipline in favour of more regulation in the financial sector continues unabated after the crisis. As I and others have pointed out (see, for example, here and here) regulatory capture has played a crucial role in causing the financial crisis of 2007-2009. Second, the Prize comes at a time when the European Union has chosen to confer authority over bank supervision and regulation on the ECB as a non-democratically elected institution with no formal accountability. Clearly, the possibility of regulatory capture in combination with entrusting an institution devoid of any accountability with bank oversight raises red flags. Therefore, policymakers and regulators would be well-advised to read Tirole’s œuvre (along with other capture theory literature in general) and critically question the regulatory approach for the challenges ahead.

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]]>https://finhistomics.com/2014/10/18/tiroles-nobel-prize-in-economics-and-its-implications-for-regulation/feed/0finhistomicsRegulators’ Irrational Rationality and Bankers’ Rational Irrationality: Too Big to Fail, Self-Regulation, Moral Hazard and the Global Financial Crisis, 2007-2009https://finhistomics.com/2014/10/13/regulators-irrational-rationality-and-bankers-rational-irrationality-too-big-to-fail-self-regulation-moral-hazard-and-the-global-financial-crisis-2007-2009/
https://finhistomics.com/2014/10/13/regulators-irrational-rationality-and-bankers-rational-irrationality-too-big-to-fail-self-regulation-moral-hazard-and-the-global-financial-crisis-2007-2009/#respondMon, 13 Oct 2014 18:08:33 +0000http://finhistomics.com/?p=281A new article by me will be published in the Oesterreichische Zeitschrift fuer Geschichtswissenschaften (OeZG) in early 2015. The Working Paper may be downloaded from the Social Science Research Network (SSRN).

Banks and other financial institutions which were too-big-to-fail (TBTF) played a central role during the Global Financial Crisis of 2007-2009. The present article lays out how misguided policies enabled banks to grow both in size as well as in complexity and therefore acquire TBTF status, particularly in the 10-year period preceding the crisis. The article then proceeds by detailing how an ill-designed policy framework, relying on supposed market approaches to regulation – including self-regulation and credit rating agencies – enabled TBTF financial institutions to game the system and thereby exploit negative externalities which the flawed policy framework in connection with TBTF status had granted large, systemically important financial institutions. The article therefore identifies defective government policies as the chief cause for the financial crisis of 2007-2009, revealing an urgent need for financial sector reform.

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]]>https://finhistomics.com/2014/10/13/regulators-irrational-rationality-and-bankers-rational-irrationality-too-big-to-fail-self-regulation-moral-hazard-and-the-global-financial-crisis-2007-2009/feed/0finhistomicsCyprus: Bulwark of Capitalismhttps://finhistomics.com/2013/03/27/cyprus-bulwark-of-capitalism/
https://finhistomics.com/2013/03/27/cyprus-bulwark-of-capitalism/#respondWed, 27 Mar 2013 08:05:17 +0000http://finhistomics.com/?p=180In the night on Monday, Cyprus’s government agreed on a haircut of up to 40% on deposits exceeding €100,000 and bondholders, while protecting savings below the threshold of €100,000 (which are insured under the Deposit Protection Scheme, DPS) in order to restructure Cyprus’s ailing two big banks. Earlier plans which envisaged a haircut of at least 6.75% on all deposits were put aside, and rightly so.

Cyprus therefore is a template for all those countries that sought to attract capital by lax banking regulation and coddling the banking sector in an attempt to establish themselves as an international financial centre. And a capital of capital Cyprus became. At least insofar as Cypriot banks succeeded in attracting capital, mostly from Russia and from dubious sources, as the Guardian puts it. The European Union’s reluctance to step in and foot the bill for Cypriot banks’ mismanagement over the past couple of years is in fact attributable to the fact that it is mostly Russian oligarchs their money would bail out.

The ultimate result of shielding men from the effects of folly, is to fill the world with fools.Herbert Spencer, 1820-1903

What Cyprus agreed upon is in fact what would also have happened in other countries if our system was still shaped by the most basic principles of capitalist systems. When a bank fails, given deposit insurance, bank creditors (depositors whose deposits exceed deposit insurance limit as well as bondholders) will take a hit as soon as equity capital is wiped out. Bondholders and large depositors are being compensated for the higher risk by higher interest rates. Logically, if someone receives a compensation for bearing risk, they must be subjected to the dangers that come along with the risk, namely failure. That’s the whole thing behind risk premia.

Without deposit insurance, however, things would be different. All creditors, including all depositors, would take their pro rata share of the loss of any given failure. But that doesn’t justify levying a one-time tax as was being discussed in Cyprus a few days before. Since deposit insurance is in place in much of the world, it must be honoured. Without deposit insurance, depositors (those whose funds exceed the limit and those whose doesn’t) might have chosen a different investment that would have better suited their risk attitude.
Furthermore, not honouring deposit insurance in times of crisis would mean picking the worst of two worlds: increasing risk-taking by banks through the provision of underpriced deposit insurance and risking bank runs which are becoming more likely due this risk subsidy.

What we have seen since the Financial Crisis is that bondholders and other creditors of financial institutions collect risk premia but are shielded from the effects that justify the very same. Without the risk of failure, however, risk premia are just a rent that people can collect that successfully lobby governments and regulators into serving their very own special interests.

Cyprus, under pressure from the troika (EU, ECB, IMF) agreed on a plan that is more than compatible with a capitalist system, in fact, it’s the only way that at least emulates capitalism. Apart from the fact that Cyprus has allowed two of its banks to become too big to fail and still depends on a sizable bailout from the EU and the IMF, Cyprus way is the way to go: subject creditors of failing firms (financial and non-financial) to losses. However, doing so shouldn’t be something controversial, it should not even be worth mentioning – and it definitely shouldn’t be called a unique case by central bankers.

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]]>https://finhistomics.com/2013/03/27/cyprus-bulwark-of-capitalism/feed/0finhistomicsCyprus Bank Assets as % of GDP, 2011https://finhistomics.com/2012/11/16/178/
https://finhistomics.com/2012/11/16/178/#respondFri, 16 Nov 2012 01:25:49 +0000http://finhistomics.com/2012/11/16/178/Gowers's Weblog: The Dutch publisher Elsevier publishes many of the world’s best known mathematics journals, including Advances in Mathematics, Comptes Rendus, Discrete Mathematics, The European Journal of Combinatorics, Historia Mathematica, Journal of Algebra, Journal of Approximation Theory, Journal of Combinatorics Series A, Journal of Functional Analysis, Journal of Geometry and Physics,…]]>

Writing on my PhD thesis at the moment, I’ve had my fair share of problems with Elsevier. Please have a look at this blog post by Cambridge Mathematician Timothy Gowers and please also consider signing the Elsevier boycott @ http://thecostofknowledge.com/

The Dutch publisher Elsevier publishes many of the world’s best known mathematics journals, including Advances in Mathematics, Comptes Rendus, Discrete Mathematics, The European Journal of Combinatorics, Historia Mathematica, Journal of Algebra, Journal of Approximation Theory, Journal of Combinatorics Series A, Journal of Functional Analysis, Journal of Geometry and Physics, Journal of Mathematical Analysis and Applications, Journal of Number Theory, Topology, and Topology and its Applications. For many years, it has also been heavily criticized for its business practices. Let me briefly summarize these criticisms.

1. It charges very high prices — so far above the average that it seems quite extraordinary that they can get away with it.

2. One method that they have for getting away with it is a practice known as “bundling”, where instead of giving libraries the choice of which journals they want to subscribe to, they offer them the choice between a large collection of…

Mr Achleitner tries to convey the impression that risk is bad. Fact is that risk is nothing bad per se and hence something to be avoided as risk is compensated for by reward. This means that with increasing riskiness, the expected return rises accordingly. Following Achleitner’s logic, neither bio tech companies nor bungee jumping should exist. As bio tech companies are clearly more risky than, for example, Coca Cola in terms of returns, no investor would chose to invest in bio tech having the alternative of Coca Cola if Achleitner’s risk paradigm held. But it doesn’t, and so investors do. Similarly, nobody would consider bungee jumping following Achleitner’s logic. But again, people do. In analogy to higher expected returns on risky companies, people derive pleasure from activities like bungee jumping that compensate them for the risk they are taking; otherwise there wouldn’t be any bungee jumpers.
Analogously to the two examples above, banks like Deutsche Bank give loans to clients of varying risk characteristics. They do not, however, engage in such activities because of their philanthropic attitude but because of the simple fact that it’s profitable as higher risk clients pay higher interest rates in order to compensate for the risk.

FURTHERMORE, MR ACHLEITNER ARGUES THAT DIVERSIFIED FIRMS AND HENCE LARGE BANKS ARE LESS RISKY.

In fact, the contrary is true. A wide array of research finds that diversified companies are riskier than non-diversified companies.Diversified firms destroy wealth for shareholders: Studies document that conglomerates trade at substantial discounts to more specialised competitors, implying that they are riskier than their individual parts would be. Berger & Ofek (1995), for example, estimate the value loss at between 13% and 15%. Subsequent studies confirm that diversified firms are penalised by investors and hence are not value-maximising (Lamont & Polk 2001; Ahm & Denis 2004). Usually, agency problems are put forth in order to explain why conglomerates are worth less than the sum of their individual parts. (I’ll cover this topic in a separate post.)
Surprisingly, examining the banking sector, Elsas, Hackethal & Holzhäuser (2010) do not find any conglomerate discounts around the turn of the millennium. Similarly, Baele, De Jonghe & Vennet (2007) find that a higher share of non-interest income of overall income (i.e. diversification) actually increases banks’ value.
This discrepancy between financial and non-financial firms is displayed by historical developments. During the 1950s and 1960s, firms tended to diversify their businesses widely, leading to many prominent conglomerates but ultimately to inefficient firms. As a result, the 1980s saw a reversal of this trend back towards more focussed firms again. The development in the banking sector is quite different: For the past two decades, while non-financial firms disinvested and specialised, banks have been increasing business diversification. Elsas, Hackethal & Holzhäuser (2010) calculate that the level of diversification of large banks rose by more than one third from 1996 to 2003 as commercial banks expanded fee-based activities, banks with already high fee income moved into trading business and other banks started to offer insurance services.

Yet, regardless of extensive diversification in the banking sector, banks do not seem to suffer from conglomerate discounts but rather show increasing profitability with decreasing business focus.
This increased profitability from diversification in the banking sector does not, however, mean that it is less risky. On the contrary, because diversification in the financial sector increases risk do investors demand lower returns and profits increase. This apparent counterintuitive relationship is due to the fact that financial diversification comes at the cost of increased market risk (Baele, De Jonghe & Vennet 2007) and systemic risk. While market risk in finance denotes the risk of any particular company that arises from the vulnerability to the overall market, systemic risk is the danger of a collapse of the entire financial system as a result of any single financial institution defaulting, similar to a domino effect. Especially systemic risk is important as it is of great relevance to the stability of the financial sector and as a corollary of great interest to regulators. And it is systemic risk in particular that large banks impose on the financial system.

In short, a bank’s size is directly related to profitability, the risk it is exposed to from the market as well as to the risk it poses to the financial sector and ultimately to the economy. This relationship is, of course, exceptionally valuable to banks. If banks grow in size, not only will their profits rise (disproportionally) but also will the risk of bankruptcy decrease because large banks’ failure would jeopardise the economic system. As a result, large banks know that they will be bailed out by the government if – when – tail risk materialises.

From this increased danger that large banks constitute, which makes it impossible to let them fail for governments and central banks, arises a strong incentive to grow. In a study from 2009, Brewer & Jagtiani (2009) provide conclusive evidence that US banks have been willing to pay significant premiums for mergers that would make them too-big-to-fail. These premiums are, of course, only paid because future benefits in the form of indirect government subsidies and implicit bailout guarantees in times of distress outweigh these costs. A recent study conducted by Gandhi & Lustig (2012) finds that the US governments subsidises large banks to take on tail risk by $4.71bn per year per bank, on average. Not only is the cost of equity capital distorted by implicit government insurance but also do these practices interfere with competition in other respects. Since TBTF banks are unlikely to go out of business, they enjoy significantly more trust as their survival is implicitly guaranteed by the government. As a result, big banks grow even bigger because they are able to attract more deposits (at lower cost) than smaller competitors because the former are (rightly) perceived to be safer.

FINALLY, ACHLEITNER CLAIMS THAT ALL EXPERTS SHARE HIS POINT OF VIEW.

This point is actually so wrong that I don’t know where to start and any attempt to list the experts that disagree with Mr Achleitner necessarily will be incomplete. But let’s give it a try by subsuming into categories, listing only the most important representatives:

In 2004, Ron Feldman & Gary Stern of the Federal Reserve Bank of Minneapolis authored a book called “Too Big to Fail – The Hazards of Bank Bailouts” which analyses the problems of TBTF most thoroughly.
Former chief executive of the Federal Reserve Bank of Kansas City and current director of the Federal Deposit Insurance Corporation, Thomas Heonig, stressed that TBTF threatens small banks.
Moreover, former chairman of the Federal Reserve Paul Volcker has been advocating splitting up TBTF banks for several years.
Finally, and probably most surprisingly, even the omnipotent former FED chairman Alan Greenspan, under whose aegis the bulk of TBTF building had happened unimpededly, called for breaking up big banks.

Bank CEOs:

Most importantly, Sandy Weill, who almost single-handedly transformed Citigroup into what it is today – one of the most important TBTF institutions – by merging Citigroup and Travelers (an insurer with investment banking divisions like Smith Barney and Salomon Brothers, which had been acquired by Travelers the year before) in 1998 when Glass-Steagall was still in place now considers TBTF banks a serious problem.

IF THEY ARE TOO BIG TO FAIL, THEY ARE TOO BIG TO EXIST.Joseph Stiglitz, Nobel Prize Laureate

Bottom line, the risk of failure is an essential feature of any market economy. Only if certain firms – large banks – cannot be allowed to fail, risk is dangerous because it threatens the market system. For over two decades, too-big-to-fail banks have been able to extract TBTF rents at the cost of taxpayers and are now, of course, unwilling to break themselves up and lose one of their most important profit centres – taxpayers’ subsidies. It is before this background that Mr Achleitners remarks ought to be understood. Whenever firms or sectors manage to get themselves a free lunch, they are naturally unwilling to leave the buffet. Fact is, however, that TBTF banks are not safer for the economy, they are just safer for shareholders because taxpayer take on part of the risk – without, of course, being compensated in good times.

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]]>https://finhistomics.com/2012/10/19/who-benefits-and-who-loses-from-tbtf-banks-the-economics-of-too-big-to-fail/feed/2finhistomicstoo-big-to-fail011-796x528Resurrecting the Gold Standard: Myths and Reality of Gold-Backed Currencieshttps://finhistomics.com/2012/09/05/resurrecting-the-gold-standard-myths-and-reality-of-gold-backed-currencies/
https://finhistomics.com/2012/09/05/resurrecting-the-gold-standard-myths-and-reality-of-gold-backed-currencies/#commentsWed, 05 Sep 2012 10:20:46 +0000http://finhistomics.wordpress.com/?p=75The recent debate in the Republican Party over the gold standard has kindled interest in whether or not re-introducing gold-backed currencies would be a good idea.

It is advisable to begin with a word of caution. Although it is commonly talked about “THEGold Standard”, there is no such thing as one particular gold standard. The gold standard of the late 1800s differs greatly from the Bretton Woods system. While in the former, currencies were indeed backed by gold, in the latter only the US dollar was. Other important currencies were in turn pegged to the US dollar so as to create a quasi-gold standard. The interwar period gold standard was yet another gold standard.
Subsequently, I will address three prevailing myths about a gold standard, using the gold standard of the 19th century as a reference point:
MYTH #1: A gold standard is based on gold only

MYTH #2: A gold standard will automatically lead to price stability and growth

Although Krugman argues that the gold standard was not a period of stability, even less so than “under the dangerous inflationist Ben Bernanke”, the 19th century was relatively prosperous.
While proponents of a gold standard seem to think that it was the gold-based monetary system that led to this unprecedented calm period after the end of the Franco-Prussian war in 1871 until the outburst of the First World War, this is not exactly true. The prevailing opinion amongst contemporary economic historians is that not the gold standard led to the peaceful and prospering era between 1871 and 1914 but the other way around. It was the exceptionally placid period of the late 19th century which saw an enormous increase in world trade that allowed the gold standard to work.

In times that are not exactly as favourable as around the turn of the previous century, price stability may look more like that of the interwar period when the gold standard was attempted to be resurrected on the reminiscences of a prospering and idyllic past:

MYTH #3: The functioning of a gold standard is almost magically granted since it seems so natural

The functioning of a gold standard cannot be regarded as granted. Beginning in the 1890s, the gold standard experienced increasing difficulties. Global gold shortages put deflationary strains on the gold standard countries. This was helped by the fact that the pound sterling was increasingly being used as money, a money whose stability was unquestioned and consequently was never believed to devalue. Again, a considerable difference to the US dollar.
From the graph below, which shows the historic prices of gold and the price of gold deflated by the CPI (All Urban Consumers: All Items), it can be seen how volatile not only the price but also the purchasing power of gold really were over time. The chart clearly displays that gold is, like everything else, subject to the simple law of supply and demand. Arguably, gold is even more susceptible to booms and busts because there is so little inherent value relative to the value it is being given in times of uncertainty.

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]]>https://finhistomics.com/2012/09/05/resurrecting-the-gold-standard-myths-and-reality-of-gold-backed-currencies/feed/2finhistomicsInflation during the Inter-war Gold Standard, 1918-1939fredgraph (2)Apple vs Samsung – Patents, Monopolies & Innovationhttps://finhistomics.com/2012/08/30/apple-vs-samsung-patents-monopolies-innovation/
https://finhistomics.com/2012/08/30/apple-vs-samsung-patents-monopolies-innovation/#commentsThu, 30 Aug 2012 15:28:22 +0000http://finhistomics.wordpress.com/2012/08/30/apple-vs-samsung-patents-monopolies-innovation/The verdict unanimously delivered by the 9-head jury in San Jose in the Apple vs Samsung case raises several questions – apart from the obvious one whether the question posed by Judge Koh to Apple’s lawyer if he smoked crack should really have been addressed to the jury. In this context, granting Apple compensation for patent infringement for Samsung’s Galaxy Tab 10.1 LTE and Intercept, two devices that the jury itself found not to be infringing Apple patents, may not build up that kind of confidence that would be essential for a verdict made by a jury that is most likely completely clueless about the complex lawsuit.

Second, Federal Appeals Court Judge Richard Posner points out that the patent system itself is flawed as patent law does not take into account specificities of industries. Posner argues that some industries like the pharmaceutical sector do need patent protections for three reasons. First, the costs of inventing in the pharmaceutical industry are very high. Second, the patent term (usually 20 years) begins when the invention is made but before drug testing. As this phase often takes up to 10 years, the effective protection from competition is halved. Third, while the cost of inventing a drug is very high, the cost of producing it is very low. Therefore, the inventor of a drug would not be able to recover its expenditures without being granted a monopoly over the sale of the drug.

The mobile sector, however, differs greatly from the pharmaceutical sector, as Posner remarks. Innovations in the mobile and other fast-paced sectors are cheap and firms employ teams of engineers that will eventually all make similar improvements in the process of product improvement. This raises the question whether it is in the interest of consumers that a company that makes a new improvement one day or one week before competitors should be given a patent and thus be granted a monopoly on it.
As a matter of fact, most of the features and ideas that are discussed in courtrooms all over the world are function-driven. As such they don’t allow many different ways to approach them.
The slide-to-unlock gesture, for example, as Matthew Yglesias points out, is an excellent idea. But it shouldn’t be a patent. Unlocking phones in the Nokia era was pressing a combination of keys. That was when mobile phones actually still had keys, of course. With a keyless smartphone, how else would you unlock the device? Regardless of the fact that this again had been based on prior art when Apple was granted the patent on it, the crucial point is that even if it had been Apple’s idea, it is contrary to the public interest to grant patents on such things. Erik Kain on Forbes links the unlock feature to the essentiality of a doorknob. Without any question, doors without doorknobs would make our lives difficult if some company had patented its use. The doorknob, however, has not been patented – for good reasons. And neither should have slide-to-unlock and many other things, not the least of which is a rectangular shape with rounded edges.

Proponents of strict intellectual property rights usually argue that patents ensure that companies spend money on research and development, which in turn boosts the economy. This point is highly questionable especially for a sector in which the firm that markets an innovation first has its name associated with it even without a patent. Since we are not talking about stealing in the narrow sense but either developing independently but simultaneously or imitating in the worst case, expenditures on research and development are not likely to decrease in a quick environment like the mobile sector without patents. And innovation is not only based on property rights as history shows. Switzerland, for example, didn’t have any until 1907 and neither did the Netherlands until 1912. Both countries, however, were highly innovative, being at the forefront of industrialisation in continental Europe. Recent research conducted by Lea Sheaver (PDF) confirms that the “innovation hypothesis”, holding that stronger intellectual property rights increase innovation, is lacking empirical evidence. On the contrary, her findings suggest that patents may be detrimental to innovation and growth.

The bottom line is that firms like Apple try to extract rents by exploiting their monopoly positions. By aggressively suing competitors, Apple attempts to profit as long as possible from innovations, which may or may not be theirs, that gave them a dominant market share early on. Profit margins of 58%, which Apple generates on iPhone sales, are only sustainable if competitors can be deterred from entering the market or, in the case of Samsung, exclude them. The ones who suffer are the consumers. Unfortunately, Apple’s way seems to be the way many companies chose to go. In our system being innovative and producing products that add value for consumers seems to be significantly more difficult than erecting and exploiting monopoly powers.

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]]>https://finhistomics.com/2012/08/30/apple-vs-samsung-patents-monopolies-innovation/feed/1finhistomicsWelcome to my blog!https://finhistomics.com/2012/08/18/hello-world/
https://finhistomics.com/2012/08/18/hello-world/#respondSat, 18 Aug 2012 00:58:22 +0000http://finhistomics.wordpress.com/?p=1On finhistomics [FIN(ance)HIST(ory)(econ)OMICS], I will be blogging on current topics from finance, economics and business (along with a little politics – not much, promise) spiced up with some historical background.

It will critically respond to and comment on pressing issues, highlighting especially economics topics from a sometimes different view, incorporating behavioural aspect as well as returning to basic and elementary economics principles that seem to have been forgotten along the path to the efficient market/rational expectations hypothesis.

The general aim of this blog is to exercise and thereby promote independent thinking and foster free markets as opposed to policies preserving status quo inefficiencies and pro-business legislatures bringing irreversible damage over economies.